Agility through dynamic capabilities

This study demonstrated that overall, the case companies possess dynamic capabilities (see Table 5 in section 5.6) and it seems that seizing activities, including organizational structure and having extra resources contributed to agility in companies’ responses. Most companies reported their organizational structure and hierarchy level quite low which in turn is most likely contributed to agility e.g. enabling an environment that has been supportive of exper-imentation and further, allowed speed in responses. This finding support previous studies (e.g. Arbussa et al, 2016) that state that SMEs are open to change and implement changes more easily due to flatter organization structure and less bureaucratic processes.

However, some differences can be seen in companies’ dynamic capabilities. Preserving agil-ity through seizing include activities such as building “slack”. Thus, companies differed in possessing extra resources which may in turn explain responses to sudden changes, such as Company B’s strategy to hire more people in response to restrictions resulted from covid pandemic. Nevertheless, it should be noted that differences in having extra resources may be related to company size. Another difference in dynamic capabilities between the

companies can be seen in transforming activities. Company A reported frequent renewal of processes and Company B sees process renewal an important source of innovation. On con-trast, Company C and D see that processes should not be renewed. Thus, these findings reveal mixed results in achieving agility through transforming. It remains unclear what ex-plains these differences between the results. Nevertheless, as dynamic capabilities need to be closely connected to strategy (Teece et al., 2016), the assessment or interpretation of dynamic capabilities in more detail is not fruitful because case companies’ strategies and dynamic capabilities as such were not researched in this study.

6.4 Challenges from SME perspective

According to literature, SMEs are subject to liability of smallness, foreignness, newness and outsidership especially when operating in foreign environments (Sethi & Guisinger, 2002).

Respectively, this chapter categorizes and discusses findings gathered from the empirical data under each liability.

6.4.1 Liability of smallness

Three out of four interviewees stated that they had suffered from liability of smallness. Re-spondents highlighted challenges related to smallness and newness both from customer acquisition and recruitment point of view. First, this finding is in line with Eggers (2020) who stated smalless often coincides with newness. Second, liability of smallness was evident among the case companies in terms of financial constraints, yet in general, lack of capabili-ties was not seen as a constraint. Thus, this finding support partially prior literature (e.g.

Knight & Cavusgil, 2004; Zhou et al., 2007) that link SME constraints to resources and capa-bilities. With regards to agility, Company A’s response to relocate due to high expenses demonstrate flexibility (Sherehiy et al., 2007).

6.4.2 Liability of newness

The study found that companies have had difficulties in sales and gaining top talent due to lack of legitimacy. This relates to liability of newness that arises from firm’s external pro-cesses that include relationships with customers, suppliers and different stakeholders (Kale

& Arditi, 1998). These findings support previous research (e.g. Choi & Shepherd, 2005) in terms of lack of perceived reliability. Companies had responded to liability of newness and smallness by building relationships in order to compete efficiently. Respectively, this sup-ports findings in prior literature (e.g. Kale & Arditi, 1998; Lu & Beamish, 2001) stating that young and small firms need to build relationships to appear valid. Relationship aspect is discussed in more detail under chapter 6.4.4. Liability of outsidership.

6.4.3 Liability of foreignness

This study largely supports findings of prior studies, which have outlined that SMEs in for-eign markets are subject liability of forfor-eignness (e.g. Zaheer, 1995). Liability of forfor-eignness is associated with costs and difficulties which foreign companies face when entering foreign markets. Hence, local companies are not subject to this liability. The difficulties that foreign companies face are related to lack of information, discrimination by the government and foreign exchange risk (Hennart et al., 2002). The case companies in this study were subject to lack of knowledge with regards to salary level in the US, benefits in tech industry, distri-bution of sales areas and initial entry location within the United States. Moreover, establish-ing a team and trainestablish-ing local employees were seen as challengestablish-ing due to time difference and physical distance which supports findings in Zaheer (1995) that companies face chal-lenges of foreignness with regard to distance to home country, including travel and trans-portation costs and costs resulting from different time zones. Contrary to the findings of Hennart et al. (2002), this study did not find that case companies had encountered issues related to foreign exchange risk or discrimination by the government.

In the case of salary level, market research was made which supports findings in Liesch et al. (2011). In addition to previous studies (e.g. Hennart et al., 2002; Zaheer, 1995), these findings support work of Lu and Beamish (2001) stating that firms need to acquire new ca-pabilities and knowledge of the new market.

6.4.4 Liability of outsidership

Vahlne et al. (2012) identified that liability of outsidership often coincides with liability of foreignness. Liability of outsidership refers to uncertainty that arises from being an outsider in the business environment in terms of networks. New business networks are important especially for SMEs with niche products, because they obtain local market knowledge (Schweizer, 2013). The results of this study demonstrate that use of locals is recommended as they are more knowledgeable of the US market. Moreover, the importance of relation-ships and physical presence were emphasized which supports findings in Liesch et al. (2011) and Kalafsky (2009). The use of channel partners, head-hunting agencies and collaborating with big firms refer to choosing foreign partners to exploit local networks (Galkina & Chetty, 2015). Getting closer to clients and accessing new networks is important and can be done by using company’s internal resources or establishing meaningful relationships with stake-holders (Liesch et al., 2011; Magnani & Zucchella, 2019). In foreign markets, networking is useful to gain access to market information, resources and opportunities. These factors con-tribute to firm growth and performance. Since US business environment was perceived quite different compared to Finnish business environment, networks and relationships help to cope with overall uncertainty arising from foreignness (Liesch et al., 2011) These findings further support the work of Miller (1992) on organizational responses to uncertainty through collaboration. However, although collaboration was seen beneficial, it has gener-ated difficulties such as slow-moving decision-making of the big companies and required follow ups.

6.4.5 Summary of findings on liabilities

Table 7 summarizes the findings of this section based on challenges companies have faced with regards to liability of foreignness, smallness, newness and outsidership. The table shows that a challenge can be due to several liabilities.

Table 7. Findings on liabilities.

When companies operate in turbulent or uncertain environment, disruptions may generate opportunities (Nemkova, 2017). The empiric findings of this study demonstrated that un-certainties created also opportunities for all case companies. Covid pandemic increased the sales of consumer electronics which in turn was seen profitable for Company B. This

supports findings in previous studies (Eggers & Kraus, 2012) that customer behavior influ-ences new ventures during hard economic uncertainty. However, customer behavior is in-dustry specific, and the impact may have been different in other industries. Furthermore, although trade war, political tensions and covid-19 pandemic has affected negatively to Company B, they have experienced positive outcomes: “--when things are built again, it is always an opportunity for you to go in that business.” Moreover, the study found that the shift to remote work was seen also beneficial.

Respectively, both Company C and Company D saw opportunities due to covid as remote sales has become easier and more normal due to the lack of other alternatives. Furthermore, covid pandemic has generated opportunities for Company C relating to the company’s abil-ity to produce automatic solutions. In addition, Interviewee A had experienced that due to the pandemic she felt closer to people because more remote gatherings and teambuilding meetings were arranged.

7 Conclusions

In previous chapters, the findings have been presented and analyzed. This chapter summa-rizes the study and concludes the most relevant findings. The limitations of this study are evaluated and suggestions for future research are presented.